81R7761 PB-F
By: Isett H.B. No. 1696
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of pharmacy benefit managers and to
payment of claims to pharmacies and pharmacists.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle D, Title 13, Insurance Code, is amended
by adding Chapter 4154 to read as follows:
CHAPTER 4154. PHARMACY BENEFIT MANAGERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 4154.001. DEFINITIONS. In this chapter:
(1) "Covered entity" means a nonprofit hospital or
medical services corporation, a health insurer, a health benefit
plan, a health maintenance organization, a health program
administered by a state agency in the capacity of provider of health
coverage, or an employer, labor union, or other group of persons
organized in this state that provides health coverage. The term
does not include:
(A) a self-funded health coverage plan that is
exempt from state regulation under the Employee Retirement Income
Security Act of 1974 (29 U.S.C. Section 1001 et seq.);
(B) a plan issued for health coverage for federal
employees; or
(C) a health benefit plan that provides coverage
only for accidental injury or a specified disease, a hospital
indemnity plan, a Medicare supplement plan, a disability income
plan, a long-term care plan, or any other limited benefit health
insurance policy or contract.
(2) "Covered individual" means a member, participant,
enrollee, contract holder, policyholder, or beneficiary of a
covered entity who is provided health coverage by the covered
entity. The term includes a dependent or other individual who
receives health coverage through a policy, contract, or plan for a
covered individual.
(3) "Pharmacy benefit management" means
administration or management of prescription drug benefits
provided by a covered entity under the terms and conditions of a
contract between a pharmacy benefit manager and the covered entity.
(4) "Pharmacy benefit manager" has the meaning
assigned by Section 4151.151. The term includes a person acting on
behalf of a pharmacy benefit manager in a contractual or employment
relationship in the performance of pharmacy benefit management
services for a covered entity. The term does not include:
(A) a health insurer that holds a certificate of
authority to engage in the business of insurance in this state if
the health insurer or any subsidiary provides pharmacy benefit
management services exclusively to its own insureds; or
(B) a public self-funded pool or a private single
employer self-funded plan that provides pharmacy benefits or
pharmacy benefit management services directly to its
beneficiaries.
Sec. 4154.002. RULES. The commissioner may adopt rules and
standards as necessary to implement this chapter.
[Sections 4154.003-4154.050 reserved for expansion]
SUBCHAPTER B. REGULATION OF PHARMACY BENEFIT MANAGERS
Sec. 4154.051. APPLICABILITY. This chapter applies to each
pharmacy benefit manager that provides claims processing services,
other prescription drug or device services, or both claims
processing services and other prescription drug or device services
to covered individuals who are residents of this state.
Sec. 4154.052. CERTIFICATE OF AUTHORITY AS ADMINISTRATOR
REQUIRED. (a) A person may not act as or represent that the person
is a pharmacy benefit manager in this state unless the person is
covered by and is engaging in business under a certificate of
authority as a third-party administrator issued under Chapter 4151.
(b) Chapter 4151 applies to a pharmacy benefit manager.
Sec. 4154.053. PERFORMANCE OF DUTIES; GOOD FAITH; CONFLICT
OF INTEREST. (a) In operating as a pharmacy benefit manager, a
pharmacy benefit manager shall exercise good faith and fair dealing
in the performance of contractual obligations toward a covered
entity.
(b) A pharmacy benefit manager shall notify a covered entity
in writing of any activity, policy, practice, ownership interest,
or affiliation of the pharmacy benefit manager that may present a
conflict of interest.
Sec. 4154.054. REQUIREMENTS REGARDING CONTACTING COVERED
INDIVIDUALS. Except as otherwise provided by the terms of the
contract with a covered entity, a pharmacy benefit manager may not
contact a covered individual without the express written permission
of the covered entity.
Sec. 4154.055. DISPENSING OF SUBSTITUTE PRESCRIPTION DRUG
FOR PRESCRIBED DRUG. (a) A pharmacy benefit manager may request
the substitution of a lower priced generic and therapeutically
equivalent drug for a higher priced prescribed drug only as
provided by this section. The pharmacy benefit manager must obtain
the approval of the prescribing practitioner before requesting any
substitution under this section.
(b) If the net cost to the covered individual or covered
entity of the substituted drug exceeds the cost of the prescribed
drug, the substitution may be made only for medical reasons that
benefit the covered individual.
(c) A pharmacy benefit manager may not substitute an
equivalent prescribed drug contrary to a prescription drug order
that prohibits a substitution.
Sec. 4154.056. DUTIES TO PHARMACY NETWORK PROVIDER. (a) A
pharmacy benefit manager may not require a pharmacy network
provider to comply with recordkeeping provisions more stringent
than those required by other state law or rule or by federal law or
regulation.
(b) If a pharmacy benefit manager receives notice from a
covered entity of termination of the covered entity's contract, the
pharmacy benefit manager shall notify, not later than the 10th
business day after the date of the notice, each pharmacy network
provider affected by the termination of the effective date of the
termination.
(c) Not later than the third business day after the date of a
price increase notification by a manufacturer or supplier, a
pharmacy benefit manager shall adjust its payment to the pharmacy
network provider in a manner consistent with the price increase.
SECTION 2. Section 843.002, Insurance Code, is amended by
adding Subdivision (9-a) to read as follows:
(9-a) "Extrapolation" means a mathematical process or
technique used by a health maintenance organization or pharmacy
benefit manager that administers pharmacy claims for a health
maintenance organization in the audit of a pharmacy or pharmacist
to estimate audit results or findings for a larger batch or group of
claims not reviewed by the health maintenance organization or
pharmacy benefit manager.
SECTION 3. Section 843.338, Insurance Code, is amended to
read as follows:
Sec. 843.338. DEADLINE FOR ACTION ON CLEAN CLAIMS. Except
as provided by Sections [Section] 843.3385 and 843.339, not later
than the 45th day after the date on which a health maintenance
organization receives a clean claim from a participating physician
or provider in a nonelectronic format or the 30th day after the date
the health maintenance organization receives a clean claim from a
participating physician or provider that is electronically
submitted, the health maintenance organization shall make a
determination of whether the claim is payable and:
(1) if the health maintenance organization determines
the entire claim is payable, pay the total amount of the claim in
accordance with the contract between the physician or provider and
the health maintenance organization;
(2) if the health maintenance organization determines
a portion of the claim is payable, pay the portion of the claim that
is not in dispute and notify the physician or provider in writing
why the remaining portion of the claim will not be paid; or
(3) if the health maintenance organization determines
that the claim is not payable, notify the physician or provider in
writing why the claim will not be paid.
SECTION 4. Section 843.339, Insurance Code, is amended to
read as follows:
Sec. 843.339. DEADLINE FOR ACTION ON [CERTAIN] PRESCRIPTION
CLAIMS; PAYMENT. (a) A [Not later than the 21st day after the date
a] health maintenance organization, or a pharmacy benefit manager
that administers pharmacy claims for the health maintenance
organization, that affirmatively adjudicates a pharmacy claim that
is electronically submitted, [the health maintenance organization]
shall pay the total amount of the claim through electronic funds
transfer not later than the 14th day after the date on which the
claim was affirmatively adjudicated.
(b) A health maintenance organization, or a pharmacy
benefit manager that administers pharmacy claims for the health
maintenance organization, that affirmatively adjudicates a
pharmacy claim that is not electronically submitted, shall pay the
total amount of the claim not later than the 21st day after the date
on which the claim was affirmatively adjudicated.
SECTION 5. Section 843.340, Insurance Code, is amended by
adding Subsections (f) and (g) to read as follows:
(f) A health maintenance organization or a pharmacy benefit
manager that administers pharmacy claims for the health maintenance
organization may not use extrapolation to complete the audit of a
provider who is a pharmacist or pharmacy. A health maintenance
organization or a pharmacy benefit manager that administers
pharmacy claims for the health maintenance organization may not
require extrapolation audits as a condition of participation in the
health maintenance organization's contract, network, or program
for a provider who is a pharmacist or pharmacy.
(g) A health maintenance organization or a pharmacy benefit
manager that administers pharmacy claims for the health maintenance
organization that performs an on-site audit under this chapter of a
provider who is a pharmacist or pharmacy shall provide the provider
reasonable notice of the audit and accommodate the provider's
schedule to the greatest extent possible. The notice required
under this subsection must be in writing and must be sent by
certified mail to the provider not later than the 15th day before
the date on which the on-site audit is scheduled to occur.
SECTION 6. Section 843.344, Insurance Code, is amended to
read as follows:
Sec. 843.344. APPLICABILITY OF SUBCHAPTER TO ENTITIES
CONTRACTING WITH HEALTH MAINTENANCE ORGANIZATION. This subchapter
applies to a person, including a pharmacy benefit manager, with
whom a health maintenance organization contracts to:
(1) process or pay claims;
(2) obtain the services of physicians and providers to
provide health care services to enrollees; or
(3) issue verifications or preauthorizations.
SECTION 7. Subchapter J, Chapter 843, Insurance Code, is
amended by adding Sections 843.354, 843.355, and 843.356 to read as
follows:
Sec. 843.354. DEPARTMENT ENFORCEMENT OF PHARMACY CLAIMS.
(a) Notwithstanding any other provision of this subchapter, a
dispute regarding payment of a claim to a provider who is a
pharmacist or pharmacy shall be resolved as provided by this
section.
(b) A provider who is a pharmacist or pharmacy may submit a
complaint to the department alleging noncompliance with the
requirements of this subchapter by a health maintenance
organization, a pharmacy benefit manager that administers pharmacy
claims for the health maintenance organization, or another entity
that contracts with the health maintenance organization as provided
by Section 843.344. A complaint must be submitted in writing or by
submitting a completed complaint form to the department by mail or
through another delivery method. The department shall maintain a
complaint form on the department's Internet website and at the
department's offices for use by a complainant.
(c) After investigation of the complaint by the department,
the commissioner shall determine the validity of the complaint and
shall enter a written order. In the order, the commissioner shall
provide the health maintenance organization and the complainant
with:
(1) a summary of the investigation conducted by the
department;
(2) written notice of the matters asserted, including
a statement:
(A) of the legal authority, jurisdiction, and
alleged conduct under which an enforcement action is imposed or
denied, with a reference to the statutes and rules involved; and
(B) that, on request to the department, the
health maintenance organization and the complainant are entitled to
a hearing conducted by the State Office of Administrative Hearings
in the manner prescribed by Section 843.355 regarding the
determinations made in the order; and
(3) a determination of the denial of the allegations
or the imposition of penalties against the health maintenance
organization.
(d) An order issued under Subsection (c) is final in the
absence of a request by the complainant or health maintenance
organization for a hearing under Section 843.355.
(e) If the department investigation substantiates the
allegations of noncompliance made under Subsection (b), the
commissioner, after notice and an opportunity for a hearing as
described by Subsection (c), shall require the health maintenance
organization to pay penalties as provided by Section 843.342.
Sec. 843.355. HEARING BY STATE OFFICE OF ADMINISTRATIVE
HEARINGS; FINAL ORDER. (a) The State Office of Administrative
Hearings shall conduct a hearing regarding a written order of the
commissioner under Section 843.354 on the request of the
department. A hearing under this section is subject to Chapter
2001, Government Code, and shall be conducted as a contested case
hearing.
(b) After receipt of a proposal for decision issued by the
State Office of Administrative Hearings after a hearing conducted
under Subsection (a), the commissioner shall issue a final order.
(c) If it appears to the department, the complainant, or the
health maintenance organization that a person or entity is engaging
in or is about to engage in a violation of a final order issued under
Subsection (b), the department, the complainant, or the health
maintenance organization may bring an action for judicial review in
district court in Travis County to enjoin or restrain the
continuation or commencement of the violation or to compel
compliance with the final order. The complainant or the health
maintenance organization may also bring an action for judicial
review of the final order.
Sec. 843.356. LEGISLATIVE DECLARATION. It is the intent of
the legislature that the requirements contained in this subchapter
regarding payment of claims to providers who are pharmacists or
pharmacies apply to all health maintenance organizations and
pharmacy benefit managers unless otherwise prohibited by federal
law.
SECTION 8. Section 1301.001, Insurance Code, is amended by
amending Subdivision (1) and adding Subdivision (1-a) to read as
follows:
(1) "Health care provider" means a practitioner,
institutional provider, or other person or organization that
furnishes health care services and that is licensed or otherwise
authorized to practice in this state. The term includes a
pharmacist and a pharmacy. The term does not include a physician.
(1-a) "Extrapolation" means a mathematical process or
technique used by an insurer or pharmacy benefit manager that
administers pharmacy claims for an insurer in the audit of a
pharmacy or pharmacist to estimate audit results or findings for a
larger batch or group of claims not reviewed by the insurer or
pharmacy benefit manager.
SECTION 9. Section 1301.103, Insurance Code, is amended to
read as follows:
Sec. 1301.103. DEADLINE FOR ACTION ON CLEAN CLAIMS. Except
as provided by Sections 1301.104 and [Section] 1301.1054, not later
than the 45th day after the date an insurer receives a clean claim
from a preferred provider in a nonelectronic format or the 30th day
after the date an insurer receives a clean claim from a preferred
provider that is electronically submitted, the insurer shall make a
determination of whether the claim is payable and:
(1) if the insurer determines the entire claim is
payable, pay the total amount of the claim in accordance with the
contract between the preferred provider and the insurer;
(2) if the insurer determines a portion of the claim is
payable, pay the portion of the claim that is not in dispute and
notify the preferred provider in writing why the remaining portion
of the claim will not be paid; or
(3) if the insurer determines that the claim is not
payable, notify the preferred provider in writing why the claim
will not be paid.
SECTION 10. Section 1301.104, Insurance Code, is amended to
read as follows:
Sec. 1301.104. DEADLINE FOR ACTION ON CERTAIN PHARMACY
CLAIMS; PAYMENT. (a) An [Not later than the 21st day after the date
an] insurer, or a pharmacy benefit manager that administers
pharmacy claims for the insurer under a preferred provider benefit
plan, that affirmatively adjudicates a pharmacy claim that is
electronically submitted, [the insurer] shall pay the total amount
of the claim through electronic funds transfer not later than the
14th day after the date on which the claim was affirmatively
adjudicated.
(b) An insurer, or a pharmacy benefit manager that
administers pharmacy claims for the insurer under a preferred
provider benefit plan, that affirmatively adjudicates a pharmacy
claim that is not electronically submitted, shall pay the total
amount of the claim not later than the 21st day after the date on
which the claim was affirmatively adjudicated.
SECTION 11. Section 1301.105, Insurance Code, is amended by
adding Subsections (e) and (f) to read as follows:
(e) An insurer or a pharmacy benefit manager that
administers pharmacy claims for the insurer may not use
extrapolation to complete the audit of a preferred provider that is
a pharmacist or pharmacy. An insurer may not require extrapolation
audits as a condition of participation in the insurer's contract,
network, or program for a preferred provider that is a pharmacist or
pharmacy.
(f) An insurer or a pharmacy benefit manager that
administers pharmacy claims for the insurer that performs an
on-site audit of a preferred provider that is a pharmacist or
pharmacy shall provide the provider reasonable notice of the audit
and accommodate the provider's schedule to the greatest extent
possible. The notice required under this subsection must be in
writing and must be sent by certified mail to the preferred provider
not later than the 15th day before the date on which the on-site
audit is scheduled to occur.
SECTION 12. Section 1301.109, Insurance Code, is amended to
read as follows:
Sec. 1301.109. APPLICABILITY TO ENTITIES CONTRACTING WITH
INSURER. This subchapter applies to a person, including a pharmacy
benefit manager, with whom an insurer contracts to:
(1) process or pay claims;
(2) obtain the services of physicians and health care
providers to provide health care services to insureds; or
(3) issue verifications or preauthorizations.
SECTION 13. Subchapter C-1, Chapter 1301, Insurance Code,
is amended by adding Sections 1301.139, 1301.140, and 1301.141 to
read as follows:
Sec. 1301.139. DEPARTMENT ENFORCEMENT OF PHARMACY CLAIMS.
(a) Notwithstanding any other provision of this subchapter, a
dispute regarding payment of a claim to a preferred provider who is
a pharmacist or pharmacy shall be resolved as provided by this
section.
(b) A preferred provider who is a pharmacist or pharmacy may
submit a complaint to the department alleging noncompliance with
the requirements of this subchapter by an insurer, a pharmacy
benefit manager that administers pharmacy claims for the insurer,
or another entity that contracts with the insurer as provided by
Section 1301.109. A complaint must be submitted in writing or by
submitting a completed complaint form to the department by mail or
through another delivery method. The department shall maintain a
complaint form on the department's Internet website and at the
department's offices for use by a complainant.
(c) After investigation of the complaint by the department,
the commissioner shall determine the validity of the complaint and
shall enter a written order. In the order, the commissioner shall
provide the insurer and the complainant with:
(1) a summary of the investigation conducted by the
department;
(2) written notice of the matters asserted, including
a statement:
(A) of the legal authority, jurisdiction, and
alleged conduct under which an enforcement action is imposed or
denied, with a reference to the statutes and rules involved; and
(B) that, on request to the department, the
insurer and the complainant are entitled to a hearing conducted by
the State Office of Administrative Hearings in the manner
prescribed by Section 1301.140 regarding the determinations made in
the order; and
(3) a determination of the denial of the allegations
or the imposition of penalties against the insurer.
(d) An order issued under Subsection (c) is final in the
absence of a request by the complainant or insurer for a hearing
under Section 1301.140.
(e) If the department investigation substantiates the
allegations of noncompliance made under Subsection (b), the
commissioner, after notice and an opportunity for a hearing as
described by Subsection (c), shall require the insurer to pay
penalties as provided by Section 1301.137.
Sec. 1301.140. HEARING BY STATE OFFICE OF ADMINISTRATIVE
HEARINGS; FINAL ORDER. (a) The State Office of Administrative
Hearings shall conduct a hearing regarding a written order of the
commissioner under Section 1301.139 on the request of the
department. A hearing under this section is subject to Chapter
2001, Government Code, and shall be conducted as a contested case
hearing.
(b) After receipt of a proposal for decision issued by the
State Office of Administrative Hearings after a hearing conducted
under Subsection (a), the commissioner shall issue a final order.
(c) If it appears to the department, the complainant, or the
insurer that a person or entity is engaging in or is about to engage
in a violation of a final order issued under Subsection (b), the
department, the complainant, or the insurer may bring an action for
judicial review in district court in Travis County to enjoin or
restrain the continuation or commencement of the violation or to
compel compliance with the final order. The complainant or the
insurer may also bring an action for judicial review of the final
order.
Sec. 1301.141. LEGISLATIVE DECLARATION. It is the intent
of the legislature that the requirements contained in this
subchapter regarding payment of claims to preferred providers who
are pharmacists or pharmacies apply to all insurers and pharmacy
benefit managers unless otherwise prohibited by federal law.
SECTION 14. The change in law made by this Act applies only
to a claim submitted by a provider to a health maintenance
organization or an insurer on or after the effective date of this
Act. A claim submitted before the effective date of this Act is
governed by the law as it existed immediately before that date, and
that law is continued in effect for that purpose.
SECTION 15. The change in law made by this Act applies only
to a contract between a pharmacy benefit manager and an insurer or
health maintenance organization entered into or renewed on or after
January 1, 2010. A contract entered into or renewed before January
1, 2010, is governed by the law as it existed immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
SECTION 16. This Act takes effect September 1, 2009.